How to Make Sure Your Business Isn't Losing Money
There is a tendency in business to focus harder on bringing in more revenue than reducing waste.
The fact is, many businesses (perhaps yours included) make some of the same mistakes that cost them big money every year for no other reason than negligence and misplaced attention. Even if your company's finances look pretty good on paper, consider the following areas where your business may be losing money.
Tightening up the nuts and bolts on these key problems can save you real money and add to your bottom line quarter after quarter.
Check Your Advertising Return
The cost of your marketing should always be proportionate to the revenue returned from your advertising efforts. Far too often, however, companies take the incorrect approach of dumping a huge amount of money into advertising and assuming the customers will come. The idea being that, so long as the message is out there, people will see it and automatically want what it sells.
Keep in mind that not all advertising campaigns create customers at a profitable ratio. Worse yet, it isn't always possible to tell exactly how profitable a certain campaign is. For example, an Internet wide banner ad campaign is very easy to track, as click costs should always be less than confirmed banner conversions, but what about something like a billboard. It could be costing your company hundreds — even thousands — of dollars a month to keep it up, but how do you know if the number of purchases it inspires justifies its expense?
Proper Staff Training
Hiring an employee to work for you is only as profitable as the contributions he makes to your bottom line. If you consider that most employees are paid by the hour, you must ensure that they are well trained to use their time efficiently. As an example, receptionists, technical support representatives, and sales people may be unsure of their responsibilities when customers are not calling seeking their services.
As a result, such employees might honestly think it's okay to check their email or Facebook while they wait, thereby wasting the money they are costing for that hour of their time. To prevent such a drain on your company's finances, make your expectations of them clear and do check ups to ensure that they are obeying your wishes.
Another common problem is that some software allows for multiple ways of accomplishing the same task, some of which take far longer than others. If you as the business owner have a system in place that you have determined to be the fastest and most effective way to completing work, train your employees to implement it so that they waste no unnecessary paid time.
Understand Your Target Market
When planning a new advertising campaign, you must be careful not to cast too wide a net. Relating back to the advertising point made earlier, your marketing dollars are only as profitable as the return they bring back. This is why understanding your target market — their needs, concerns, and thoughts — is perhaps the most important marketing consideration you can make. To the best of your ability, identify your typical customer and design advertisements that speak almost exclusively to him or her.
Place these ads where these people are likely to be, even if these places are not the most highly trafficked of mediums. Some marketers fear that by being too exclusive, they may be offending or turning away other people who don't think the same as their typical customer, but this is an error in logic. If you know the personality and behavior patterns of those who buy your products, you can safely assume that those who think and act quite differently will not be interested in buying your products anyway, and paying to show ads to them is nothing more than pure waste
Additionally, designing broad, unspecific ads that are geared toward appeasing “everyone” who might see them weakens your sales message for your target market. The actual would-be customers will gloss over your ad and ignore you because you are not speaking effectively to them.
You may think that you're saving money by refusing to replace your out-dated computer systems, but slow machines and inferior software puts a daily drain on your company's productivity. As a small business, speed of execution is your greatest strength — without the corporate red tape in place to prevent decisions and projects from moving along quickly, you can compete on adaptability and swift product launches. However, if you and your employees are hindered by poor technology, you lose this competitive edge to the other businesses who paid what it took to install adequate equipment.
Constant software crashes, long loading times, problematic scanners and printers - these are problems that create headaches, lower morale, and take employee focus away from creating their best work by forcing them to grapple with last year's cheapest laptop. Don't be penny-wise and pound-foolish when it comes to vital office technology. Sure, you'll spend more upfront to replace every computer and monitor on the floor right now, but the money you will earn from faster, higher quality output will be worth the expense.
As the owner of your business, it is ultimately up to you to keep costs down. Sure, your company may be in the black on books as is, but how much more profit could you be making if you took the initiative to reduce costs as low as possible? Begin by looking into every supply or service your company regularly pays for. Check out competing suppliers and see if you're really getting the lowest rate, or if you're just sticking to the same supplier you've always used out of mere comfort. Comparison-shopping websites such as BizRate and NexTag are a great place to start, as their services will scour the Internet for the lowest costs around and allow you to buy from whichever one you're most comfortable with.
Another important consideration is utility costs. Offices typically use a lot of power during the day, which can total up to a pretty steep electric bill come the end of the month. Counteract this by installing all Energy Star rated appliances and swapping out the light bulbs for low-wattage CFL bulbs. Lastly, install power strips that all office equipment plugs into, and switch them off at night. Even when computers and printers are turned off when you leave the office, having them plugged into a live outlet consumes necessary power all night long.
About the Author: Tim Coffman is a freelance writer for Quicken. Quicken offers personal finance software that makes money management easy. Quicken's products help people get their spending under control with a helpful budget worksheet.